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388 Part Three Key System Applications for the Digital Age

management software. The i2 software did not work well with Kmart’s promo-
tion-driven business model, which created sharp downward spikes in demand
for products. Overstock.com’s order tracking system went down for a full week
when the company replaced a homegrown system with an Oracle enterprise
system. The company rushed to implement the software, and did not properly
synchronize the Oracle software’s process for recording customer refunds with
its accounts receivable system. These problems contributed to a third-quarter
loss of $14.5 million that year.
Enterprise applications also introduce “switching costs.” Once you adopt an
enterprise application from a single vendor, such as SAP, Oracle, or others, it is
very costly to switch vendors, and your firm becomes dependent on the vendor
to upgrade its product and maintain your installation.
Enterprise applications are based on organization-wide definitions of data.
You’ll need to understand exactly how your business uses its data and how the
data would be organized in a customer relationship management, supply chain
management, or enterprise system. CRM systems typically require some data
cleansing work.
Enterprise software vendors are addressing these problems by offering
pared-down versions of their software and “fast-start” programs for small and
medium-sized businesses and best-practice guidelines for larger companies. The
Interactive Session on Technology describes how on-demand and cloud-based
tools deal with this problem as well.
Companies adopting enterprise applications can also save time and money
by keeping customizations to a minimum. For example, Kennametal, a $2
billion metal-cutting tools company in Pennsylvania, had spent $10 million
over 13 years maintaining an ERP system with over 6,400 customizations. The
company is now replacing it with a “plain vanilla,” non-customized version of
SAP enterprise software and changing its business processes to conform to the
software (Johnson, 2010).

NEXT-GENERATION ENTERPRISE APPLICATIONS

Today, enterprise application vendors are delivering more value by becom-
ing more flexible, Web-enabled, and capable of integration with other systems.
Stand-alone enterprise systems, customer relationship management systems,
and supply chain management systems are becoming a thing of the past.
The major enterprise software vendors have created what they call enterprise
solutions, enterprise suites, or e-business suites to make their customer relation-
ship management, supply chain management, and enterprise systems work
closely with each other, and link to systems of customers and suppliers. SAP
Business Suite, Oracle e-Business Suite, and Microsoft Dynamics suite (aimed
at mid-sized companies) are examples, and they now utilize Web services and
service-oriented architecture (SOA) (see Chapter 5).
SAP’s next-generation enterprise applications incorporate SOA standards
and are able to link SAP’s own applications and Web services developed by
independent software vendors. Oracle also has included SOA and business
process management capabilities in its Fusion middleware products.
Businesses can use these tools to create platforms for new or improved
business processes that integrate information from multiple applications.
Next-generation enterprise applications also include open source and
on-demand solutions, as well as more functionality available on mobile
platforms. Open source products such as Compiere, Apache Open for Business
(OFBiz), and Openbravo lack the functionality and support provided by

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